The Consumer Financial Protection Bureau (CFPB) aims to establish a public registry of potentially thorny terms and conditions in supervised nonbanks’ contracts — ones that may waive or limit consumer rights and protections such as bankruptcy rights, liability amounts or complaint rights, the agency announced Wednesday.
Such “take it or leave it” form contracts, usually drafted by a company and its lawyers, can conceal consumer harm, suppress criticism about products and services, and undermine consumer financial protection law, the bureau said.
These contracts pop up once a consumer purchases a product or downloads an app, or signs up for a service but leave consumers with no room to negotiate. Americans click a checkbox to agree to the terms of service or sign contracts with boilerplate fine print, the bureau said.
“Because of this asymmetry in power between the company and the consumer, there has been renewed interest in consumer contracts here in the U.S.,” CFPB Director Rohit Chopra said in a statement. “Jurisdictions around the world also have sought to regulate one-sided contracts or specific contract terms.”
The proposed rule would require the supervised nonbanks to submit information on terms and conditions in an effort to increase market transparency and improve risk-based oversight, the CFPB said.
The registry would be open to the public and other consumer financial protection enforcers, the bureau said Wednesday.
A public comment period will remain open for 60 days following the publication of the proposed rule on the CFPB's website or 30 days following the publication of the proposed rule in the Federal Register, whichever period is longer, the statement said.
“The CFPB would use data from the registry to identify supervised nonbanks and the risks their terms and conditions pose, prioritize which firms to examine, and plan the scope of those exams,” Chopra said.
Most of the time, consumers give in to the financial institutions’ demand owing to their market presence and the critical roles the products and services play in people’s everyday lives.
“Some companies seek to censor their customers and strip them of their rights by inserting fine print into non-negotiable contracts,” Chopra said. “The CFPB is proposing a registry of these contract clauses to find out where people are unable to speak up when they’ve been harmed."
Wednesday’s proposed rule furthers a proposal the CFPB made in December to establish a registry of nonbank financial institutions to detect repeat offenders.
Waiving service members’ legal protections, undermining credit reporting rights, limiting lender liability for bank fees caused by a lender’s repeated debit attempts, and misleading consumers by using unenforceable waivers in mortgage contracts are some of the examples of terms and conditions that would be included in the registry.
Many contracts favor the company over the consumer and sometimes include “gag clauses” that prohibit consumers from posting negative reviews online or filing a complaint, Chopra said.
Some contracts may even waive a consumer’s right to file a lawsuit though financial companies routinely take consumers to court. In such cases, waivers of liability try to shift the responsibility for the harm caused by the company to the consumer to prevent consumers from suing when they are harmed, Chopra said.